Worker Shortage Eases a Little

Forty-four percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, down 2 points from October. The share of owners with unfilled job openings far exceeds the 49-year historical average of 23 percent . . .   

Owners’ plans to fill open positions remain elevated, with a seasonally adjusted net 18 percent planning to create new jobs in the next three months, down 2 points from October and 14 points below its record high reading of 32 reached in August 2021. However, the trend in planned hiring is clearly on the decline.

Yet for now, the continued inability of labor supply to meet employer demand means that companies have to continue raising pay. The NFIB economist adds:

Seasonally adjusted, a net 40 percent reported raising compensation, down 4 points from October, but just 10 points below the 49-year record high set in January. A net 28 percent plan to raise compensation in the next three months, also down 4 points from October. Far more owners are having to increase compensation to compete than are planning to add that expense. According to the [Bureau of Labor Statistics], compensation costs overall increased 5% over the last 12 months. But with labor demand remaining strong (as has consumer spending), firms must maintain competitive compensation to retain workers and… to fill open critical positions. As long as consumers spend, firms will find it profitable to hire . . . 

The staffing shortage has limited small business owners’ ability to fully take advantage of current sales opportunities. Owners are adjusting business operations where they can with limited resources. While there might be a few cracks in the labor market appearing overall, employment remains historically strong on Main Street.

Mr. Dunkelberg also observes:

The Federal Reserve is conducting an aggressive war on inflation, with a risk that its policies will trigger a recession, as it did in 1980. The basic strategy is to get “you” to spend less, which will reduce the pressure on prices (so would producing more stuff but that’s not in the Fed’s toolbox) . . . So, what are the tens of millions of small firms who sell us our GDP doing with prices? Raising them!

The NFIB economist notes that surveys of his member firms show that the percentage of firms raising prices and the percentage of firms raising compensation both hit record highs earlier this year. They have since declined, though they remain historically high. He adds:

So, this may indeed signal the peak for raising compensation and a peak in the net percent raising selling prices (inflation)… However, that’s not an end to inflation, just a slowing in the pace of price increases.

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Mr. Freeman will host “WSJ at Large” this Friday at 7:30 p.m. ET on the Fox Business Network. The program repeats at 9:30 a.m. and 11:00 a.m. ET on Saturday and Sunday.

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James Freeman is the co-author of “The Cost: Trump, China and American Revival.”

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(Teresa Vozzo helps compile Best of the Web.)

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